Marxian analyses are now resurfacing in public dialogues about economy and society. A generation of marginalization is fading as a new generation discovers the diverse richness of the Marxian tradition’s insights. Just as an economic crisisin 1848 helped to provoke and shape Marx’s original insights, today’s crisis helps to renew interest in Marxism.

In the century before the 1970s, the victims of capitalism’s recurring crises and its critics increasingly turned toward Marx’s and other Marxists’ works. The Marxist tradition of social analysis therefore spread widely and deeply across the world. As it interacted with many different cultural, political, and historical contexts, the tradition developed multiple, different – and sometimes sharply contested - interpretations or versions of Marxist social theory. Marxism became the richest available accumulation of critical analyses of capitalism and of critical engagements with the theories that supported capitalism. It gathered the theoretical and practical lessons drawn from successes and failures of political movements more or less inspired by Marxism. Today it is an invaluable resource for theorists of and activists for social change beyond capitalism.

 

Capitalism’s defenders have mostly sought to repress, ignore, or otherwise marginalize Marxism and Marxists. While often successful, their efforts could only slow and punish Marxism’s advances in the century before 1975. Unevenly yet relentlessly, the tradition grew. From a handful of theorists and activists, Marxism proliferated to encompass Marxist labor unions, political parties, newspapers, research institutes, local, regional and national governing regimes, and internationals. It also generated internal differences, debates, and conflicts, mostly peaceful but sometimes violent, among its constituent tendencies.

 

However, the 1970s changed the conditions of and the social prospects for Marxism. Capitalism had recovered from much of the damage to its support and reputation caused by the Great Depression of the 1930s. Post-World War 2 reconstructions, time, and hope had all helped to weaken memories of that Depression. Economic, political, and cultural conditions had ripened enough by the 1970s to enable a major, sustained counterattack against reforms, regulations, and other Depression-era state interventions imposed upon capitalists. The deepening internal contradictions of the “actually existing socialist countries” that officially celebrated Marx and Marxism facilitated the global campaigns against them by leading capitalist nations. That program targeted those countries, but also Marx, Marxism, and communism everywhere as synonyms and as the dangerous end-point toward which social democratic state intervention led.

 

A resurgent capitalism celebrated its renewed strength and the weaknesses of its enemies. In the US, the New Deal, already compromised from 1945 to 1970, was afterwards systematically undermined. Unions’ social influence was greatly reduced. Labor market conditions shifted to allow a permanent end to the pre-1970s record of rising real wages for 100 years. The Reagan election sealed the change. Economics, politics, and culture shifted rightward markedly in the Anglo-American spheres but beyond as well. A neo-liberalism was promoted as the new era of privatization, deregulated markets, getting rich quick, and a pervasive individualism that suspected and dismissed most collective efforts and values.

 

In the 1970s, a new world of investment opportunities also opened up for multi-national capitalist enterprises. Technological changes in internal enterprise controls (computers), transportation (jet aviation) and communication (the internet) enabled greatly enhanced global coordination within and among capitalist corporations. Producing, installing, maintaining, and improving those technological changes became extremely profitable investment opportunities as well. Most important was the global opening up of vast new sources of relatively cheap labor (especially in and also immigrating from the former “second” and “third” worlds). Just as technological changes drove up the productivity of labor, real wages were prevented from rising. Whenever productivity rises while real wages stagnate, the result is an explosion of the capitalist surplus. The 30 years before 2008 were one of the greatest profit booms in capitalist history.

 

Capitalism’s admirers celebrated, as labor, socialism, and Marxism weakened and shrank, unevenly but nearly everywhere. Capitalism’s apologists insisted yet again that capitalism had “overcome its crisis tendencies.” Thus Alan Greenspan, the US Federal Reserve’s former chairman, said in the late 1990s, we “now live in a new economy.” Once the USSR had officially imploded, Marxism’ enemies changed their way of marginalizing if not eliminating the tradition. Where before they had portrayed it as an erroneous theory informing a failed and also treasonably dangerous practice, over the last 30 years, they treated it more as a fading historic relic that no modern person need consider, let alone study. Capitalism, they repeated, had won the struggle with socialism and emerged as the system to which “there is no alternative.” The US was its appropriate superpower champion.

 

Adjusted rationales were correspondingly developed to continue to exclude Marxist analyses from the mass media and Marxists from academic and political positions. There was no need for them; history had rendered them anachronistic. The world had moved on. Not a few Marxists found it difficult to sustain their beliefs in so changed an environment; they therefore modified their positions or departed Marxism altogether.

 

Once Greenspan’s “new economy” had collapsed in 2008 and been exposed as the same old crisis-prone capitalism, Marx and Marxism began to be rediscovered again. People are turning to the Marxian tradition for help in understanding the crisis’s causes and finding solutions. They soon encounter the tradition’s crisis-focused debate over reform versus revolution: how should the capitalist economy and society be changed in response to the crisis? In this classic form of the debate, some Marxists – reformers - propose diverse sorts of “transitions to socialism” while others – revolutionaries - attack such socialisms in the name of “communism.” Still other Marxists criticize both socialism and communism as theorized and actualized over the last century. It turns out that the anti-capitalist impulses shared by nearly all Marxists inform multiple, different, and sometimes incompatible theories and arguments. While this yields a rich tradition of critical social analysis, it obliges every writer within the tradition to identify and justify whichever particular kind(s) of Marxian theory inform(s) that writer’s analyses.

 

So let me be clear here. In this paper, I use a particular interpretation of Marxian theory to provide a unique explanation of the current capitalist crisis’s multiple causes with emphasis on the US. I also use that interpretation to criticize both sides in the classic reform versus revolution debate which is resurfacing now among Marxists and many others. On the bases of this interpretation and criticism, I offer a Marxian argument for a different sort of revolutionary response to capitalist crises. My intervention, together with those of other Marxists, demonstrates again that Marxism represents capitalism’s most persistent, most developed, and most profound self-criticism.

 

Oscillating capitalist forms and theories

 

Capitalist economies everywhere display a recurring pattern of oscillation. Periods of relatively limited state regulatory and other interventions in markets and private property repeatedly encounter and manage crises until one arrives that cannot be managed. Then, transition occurs to a period with relatively more state economic interventions. This latter period then similarly encounters and manages some crises before it too confronts one that it cannot manage. Then a transition occurs back to a period of relatively less state economic intervention. What remains the same across both periods (in my interpretation of Marxian theory) is the capitalist structure of production. In that particular structure of production, a small group of people – typically a corporate board of directors – appropriates the surplus produced by a large, different group of hired laborers.

 

We shall use the names “private” and “state” to differentiate these alternating periods or forms of capitalist economy. Thus, for example, the 1929 crisis of a private capitalism in the US ushered in a state capitalism, Roosevelt’s New Deal. Then, in the 1970s, that state capitalism encountered a crisis serious enough to provoke a transition back to private capitalism. When the latter experienced a meltdown in 2008, that crisis produced yet another oscillation back toward a state capitalism. Comparable oscillations characterize all capitalisms.

 

Two different and contending mainstream (i.e., non-Marxian) theories have also explained capitalism’s repeated crises over the last century. For each crisis, those theories proposed correspondingly different solutions. Today’s crisis is no exception. Ideological hegemony has oscillated between those two theories just as capitalism has oscillated between its two forms.

One theory – called, after one of its founders, “Keynesian economics” - claims that unregulated private markets have limits and imperfections that periodically push capitalist economies into inflations, recessions, or even depressions. Without intervention from outside, private capitalism may remain depressed or inflated long enough to threaten capitalism itself. Keynesian economics identifies the key mechanisms that produce crises in private capitalisms and recommends various state interventions (regulations and monetary and fiscal policies) to prevent or offset private capitalist crises.

 

The other mainstream theory is associated with Adam Smith, the classical “founder of modern economics” who celebrated private capitalism (free markets plus private property) as the economic system that generated the maximum possible wealth. In its evolved form, “neo-classical” economics emphasizes how and why private capitalism yields the best (“optimum”) of all possible economic outcomes. For neoclassical economists, if a non-optimal outcome occurs, the best solution is to let private capitalism heal itself via the internal mechanisms of private property and free markets. They denounce Keynesian-inspired state interventions as inevitably yielding regulators’ mistakes, politically manipulated markets, and such resulting inefficiencies as inflation, stagnation, and stagflation. State officials cannot replace, let alone improve upon, the unregulated (“free”) market mechanism. Neoclassical economists insist that free markets accommodate the infinity of different demands and supplies and communicate the infinity of information more efficiently that any state could.

 

As today’s global capitalist crisis unfolds, Keynesian state interventions are suddenly on the rise in the US after hibernating for more than thirty years. Since the 1970s, as part of global campaigns for neo-liberalism, neoclassical economists had widely reversed and suppressed Keynesian interventions. They had overthrown the domination of Keynesians and Keynesian macroeconomics that emerged from the Great Depression of the 1930s. Neoclassical economists had always attacked the Keynesian economics associated with FDR’s New Deal for seriously distorting and slowing economic growth and promoting social conflict (sometimes dubbed “class war”). They sought to reinstitute the neoclassical utopia: private and competitive markets lifting the incomes of both labor and capital and thereby avoiding class conflicts by means of growth.   

 

After the 1970s, market deregulation and privatization became the official and prevailing principles of business, politics, journalism, and academia. Neoclassical economics became once again, as before the Great Depression, the modern economics. It banished Keynesian economics as a theoretical mistake; only neo-classical economics was “correct.” Unrepentant Keynesians found their professional advances blocked and their careers often ended. Such extreme intolerance of differences between neoclassical and Keynesian economics in the realms of theory, academic discipline, and professional careers replicated the ways both of them had jointly suppressed Marxian economics and economists since the late 1940s.

 

After the 1970s, in a context of technologically driven rapid productivity gains and stagnant real wages, deregulated markets yielded, at first, the changed incentives, prices, and growth the neoclassicists had promised. As the years passed however, the economy also exhibited the market swings, uneven income and wealth developments, and eventual economic bubbles in stock markets, real estate and finance darkly predicted by Keynesian critics. Then the new millennium opened with a stock market crash followed a few years later by a real estate collapse, a liquidity crisis, and now a deep recession threatening to slide into depression of major proportions. Neo-classical economists are in retreat as Keynesians emerge from ideological exile.

 

The Keynesian message remains what it always was: the state must save capitalism from itself. It has become, again, today’s wisdom. Faced with the current crisis, only a few neoclassical economists still advocate what has become yesterday’s wisdom. However, if Obama’s Keynesian program fails or if a state interventionist form of capitalism endures for a while, capitalist crises will recur as they always have. Crises set the stage for yet another oscillation back to a private form of capitalism and back to the hegemony of neoclassical economic theory.  

 

Both sides share a profound conservatism vis-à-vis capitalism, despite holding radically different views of the need for state intervention. The oscillation between them serves their shared conservatism. It prevents crises in capitalism from becoming crises of capitalism, when the capitalist production system itself is placed in question. Oscillation between the two theories shapes and contains public debates when capitalist crises cause serious social suffering. Is the solution to the crisis more or less regulation, more or less monetary or fiscal policies, and so on. Such constricted debate keeps the public from imagining, let alone considering the Marxian alternative solution, namely transition out of either form of capitalism into a different system.

 

A Marxian alternative

 

The particular Marxian economic theory deployed here can be examined in greater or lesser detail elsewhere. [1] Instead of presenting it again here, we will display it by using it to explain the causes of the current crisis and to offer a new solution. Both the explanation and the solution differ radically from the neoclassical and Keynesian alternatives.

 

 

The crisis of US capitalism in 2008 has deep roots in the previous 125 years. From the 1870s to the 1970s, two key trends emerged: the average real wage of workers rose by about 1.3% per year while workers’ average productivity rose by just under 2% per year. For a century, workers enjoyed a rising standard of living purchase with rising real wages. And capitalist employers enjoyed a rising surplus (because value added to output per worker rose faster than wages paid per worker). The gap between workers and capitalists thus grew, but posed no political problem if workers could be satisfied with rising real wages

 

The century before the 1970s was a sustained success for US capitalism. Capitalists’ steadily rising surpluses were distributed effectively to enhance the conditions for their growth. Their surpluses paid for technical change, for taxes to enable infrastructure development and public education of the labor force, and for mergers and acquisitions to gain economies of scale, etc. Workers became focused on the rising consumption enabled by their rising wages. As they came to identify more as consumers than workers, consumerism became a powerful ideological and therefore social force. Unions were oriented chiefly toward enabling more consumption through better pay and not toward basic social change. The exceptional “success” of US capitalism reflected and depended on the continued growth of real wages at a rate below that of real productivity.

 

However, that success had its costs, its “other” side. As capitalists’ appropriated surpluses rose faster than wages, the growing economic gap enabled growing political and cultural gaps. Across the century before the 1970s, more or less real, local democratic institutions gave way to the merely formal democracy of money-driven elections and bureaucracies. Likewise deepening cultural divides separated the growing mass of workers from a concentrated elite of multi-national corporate capitalists and their better-paid dependents.

 

However, the dangers of deepening social divisions were avoided by the combination of rising personal consumption and a culture that celebrated rising consumption as the goal of life, the measure of one’s personal achievements and worth, the adequate compensation for increasingly demanding work (the “other” side of rising productivity). The birth and remarkable growth of the modern advertising industry both resulted from and reinforced that culture. The widespread social acceptance of consumption as the key standard of personal success and achievement provoked dissenting religious leaders, politicians, writers, and others to react by denouncing mass obsession with material rather than spiritual “values.” Their reactions reveal the great social power and influence of consumerism. They failed to stop, let alone reverse, the rise of a mass consumerism that had become a key part of the social glue binding the growing social gaps between workers and capitalists.

 

Starting in the mid 1970s, the long-running success formula of US capitalism stopped functioning. Real wages in the US stopped rising while productivity per workers continued to rise (see chart below).  Capitalist employers’ appropriated surpluses exploded, since the workers no longer shared in the rewards of their productivity gains.  The social divide between producers and appropriators of the surplus surged as well.

 

Capitalist employers no longer had to pay rising wages for four major reasons. First, the computer revolution started displacing millions of US workers in the 1970s. Likewise, US corporations responded to growing European and Japanese competitions by shifting production out of the US to lower-wage production sites. These developments slowed the demand for workers inside the US. At the same time, the mass movement of women from households into paid labor positions and growing immigration increased the number of job-seekers. Thus the labor market changed and employers no longer had to raise wages.

 

Most importantly, the end of rising real wages closed an era. The impact on the US cannot be overstated. A capitalism that had come to define, celebrate, and defend itself by reference to rising consumption enabled by rising wages could no longer do so. The impact was all the greater because no public debate about the meaning and implications of the change occurred. Workers experienced the change as a personal and individual matter rather than an historic economic and social change.

Sources: US Department of Labor, Bureau of Labor Statistics; US Department of Commerce, Bureau of the Census, Historical Statistics of the United States. Jason Ricciuti-Borenstein produced this graph.

 

The post-1970s explosion of surplus value production transformed US capitalism. Wealth poured into capitalists’ accounts and financed a stunning expansion of corporate wealth, power, and social influence. Corporate boards of directors distributed most of the exploding surpluses partly to themselves (as fast-rising top managerial salaries, stock options, and bonuses) and partly to lower level managers (as their remuneration and operating budgets), bankers (interest and fees), and share owners (dividends), etc. These groups prospered, while the vast mass of workers found life increasingly difficult.

 

The end of rising real wages confronted workers’ families with a choice. They could forego rising consumption since they lacked the rising wages to afford it. They did not do so. Rising consumption was the realization of personal hopes, the sign of social success, the promise to one’s children that had to be kept. When their wages no longer rose, workers responded by finding two other ways to continue raising their consumption.

 

First, with real hourly wages stagnant, workers’ households sent more of their members to do more hours of paid labor. Husbands, teenagers, retired people did more work and millions of housewives and mothers entered the labor markets. While these responses helped raise some additional family income, they also increased the supply of job-seekers which further undermined real wages for everyone.

 

Increased paid labor by more members of workers’ households imposed  enormous personal and social costs. Women increasingly held two fulltime jobs, one outside the household and one inside, since they continued to do most of the housework. The added stress of this double shift altered and strained household relationships. The divorce rate rose as did signs of alienation (drug dependency, intra-family abuse, etc.). The added costs of added household labor (in women’s work clothes, transportation, purchased meals, cleaning expenses, drugs, etc.) largely negated the net contribution it could make to resuming rising consumption. For that purpose, another source of funds had to be found.

 

That additional source was household debt. The Federal Reserve records a total household debt in 1975 of $ 734 billion. By 2006, it had risen to $ 12.817 trillion. This 30-year debt explosion has no historical precedent. Workers depleted their savings and took on ever-increasing debt levels. By 2007, US workers were exhausted by their long labor hours, emotionally stressed by the disintegration of families and households, and extremely anxious about unprecedented and, for millions of citizens, unsustainable debt levels.  

The post-1970s squeezing of the American worker financed unprecedented prosperity for US capitalists. They and their associates enjoyed a new “gilded” age. Extreme personal wealth became the object of media adulation that cultivated mass envy. The US at the end of the 20^th century replicated what Rockefeller and associates had achieved at the end of the previous century. Corporate boards of directors could and spend lavishly on computerization, research and development, and on moving production facilities abroad. They generously lubricated politicians to reinforce the conditions (technical change, job exports, immigration, etc.) for their exploding surpluses. Exploding wealth concentrated in relatively few hands led to very rapid growth in enterprises specialized in managing such wealth: investment banks, hedge funds, and so on. Wealth management slid seamlessly into speculation fueled by the euphoria of exploding wealth at the top.

 

Symptomatic of the deepening divisions in US society, one major financial speculation undertaken with corporate surpluses involved lending them at high interest rates to risky working class families who needed to borrow to sustain their consumption. Called “sub-prime” loans, they eventually betrayed investors because the workers could not afford to pay them back. They and their families could no longer work more, earn more, borrow more, nor pay back loans. The stagnant real wages that had enabled the capitalists’ boom came back to burst the capitalists’ investment bubble. Marx would have smiled at the irony.

 

Contradiction and crisis

 

With the end of rising real wages, workers borrowed chiefly because they had no other way to realize the American dream, and secondarily because they were endlessly reassured that borrowing was safe, appropriate, and itself very American. Bankers were flush with the deposits of corporations’ exploding surplus revenues. Competition among them drove all to seek newer, more profitable outlets for loans. Accusations that borrowing workers were stupid or irresponsible or that banks and other lenders were particularly devious or greedy substitute moral denunciations for social analysis. In the Marxian idiom, the class conflicts inside each enterprise and competition among capitalists interacted with a changing social context in the 1970s to end a century of rising real wages and thereafter to accumulate all the components of a major capitalist crisis, the second in 75 years.  

 

Capitalists could and did exult after the 1970s as the system delivered wealth to them on an unprecedented scale. They had, although without acknowledging the fact, substituted rising loans to their workers in place of the rising real wages their workers had enjoyed for the previous century. This was little short of a capitalist fantasy come true.  However, they preferred to believe instead that the entrepreneur-led, efficiency-driven mechanisms of private enterprise and free markets accounted for their good fortune. To them and their ideological supporters, their wealth proved that private, unregulated capitalism was superior to any conceivable alternative system. While the good times for capitalists rolled, the worlds of politics, media and academia affirmed such beliefs only too eagerly.

Ideas informed by Marxian theory such as (1) that the end of rising real wages was the hard reality underlying a debt-dependent prosperity, and (2) that the capitalists’ gains were the workers’ losses were fundamentally unacceptable and therefore generally ignored. Only when mass worker exhaustion, stress and debt drove the system to collapse did that “other side” of capitalist euphoria become visible. The return to Marxian analysis was partly an effect and also a further cause of that visibility.

 

 A Marxian solution

 

Stagnating wages alongside rising productivity are perpetual goals of capitalists in their relentless struggle with their productive laborers. If and when conditions permit, capitalist corporations will achieve those goals. When they do, the results have repeatedly been growing inequality of wealth and income, financial speculation, booms, bubbles, and their bursting into crises. The Marxian solution to such repeated crises would be to change out of such a system. Social conditions will always shift and change, but a different, non-capitalist organization of production would respond to changing conditions differently.

 

A Marxian policy of pursuing a transformation of production sites – enterprises – from capitalist to non-capitalist organizations would sharply distinguish it from today’s Keynesian or yesterday’s neoclassical policies. Such a Marxian policy would not aim to reform capitalism by either increasing or decreasing state economic intervention, by regulating or deregulating credit and other markets. Instead, it would aim to eliminate capitalism in the precise sense of fundamentally changing the class structure in production with or without more or less state intervention or regulation.

 

The policy implication of Marx’s critique of capitalism would be to put workers inside each enterprise in the collective position of receiving the surpluses they produced in that enterprise. That would, of course, position them as also the distributors of those surpluses. The surplus-producing workers in each enterprise would, in effect, become their own collective board of directors. They would replace traditional corporate boards chosen by and responsible to major shareholders. This would eliminate the capitalist enterprise’s confrontation of workers and capitalists. It would thereby change the methods and results of board decisions about what, how, and where to produce and what to do with the surpluses.

 

Such a change out of capitalism could be a major first step in the democratization of the economy generally. Democracy would require that in each enterprise, productive employees have equal roles in reaching such decisions. Subsequent steps would entail enlarging economic democracy by including those residential communities interdependent with each enterprise. Workers and residents would then share democratic power over the products and the surpluses produced in and distributed by each enterprise.

 

Changing the class structure in this way will not eliminate contradictions or even crises arising in an economy. But post-capitalist crises will be different, will be understood differently, and will be responded to in different ways. And these differences matter. First of all, crises will less likely emerge, as the current one did, from stagnating real wages. Had US workers also collectively comprised their own boards of directors, the conditions of the 1970s would not likely have led them to stop raising their own real wages. What crises did arise would be responded to much more humanely and equitably precisely because of the extension of democracy entailed by eliminating capitalist class structures of production. The costs and pains of crisis response would be equitably shared in principle, since that principle is embedded in and follows directly from the post-capitalist class structure. The grotesque disparities of today - when foreclosure and unemployment stagger millions while others suffer neither, when some collapsing industries receive massive government bailouts and others are left to die, when some municipalities and states continue to provide basic public services and others do not – would less likely occur on the basis of a post-capitalist class structure.

 

There is another key difference to consider. FDR’s New Deal imposed a mass of regulations upon capitalism with the explicit intention of ending the Great Depression and preventing another such depression in the future. New Deal regulations and taxes constrained the ways and means for capitalists to pursue their goals. However, those regulations and taxes never changed the capitalist class structure of production. Capitalist employers always remained in charge of enterprises, appropriating the surpluses and distributing them. Corporate boards of directors had every incentive – given their responsibilities to shareholders and their own self-interests – to evade, weaken or undo the New Deal regulations. Moreover, as appropriators of the surpluses produced inside each enterprise, they also had the resources to evade, weaken, or undo the New Deal regulations. In fact, capitalists responded to their incentives and utilized their resources to undo the New Deal, especially after the 1970s under the regimes of Reagan, Bush 1, Clinton, and Bush 2. In a post-capitalist class structure of the sort sketched above, it would be far less likely for enterprise boards to want or to be able to similarly undermine future anti-crisis reforms.

 

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